Arbitration

Arbitration

Arbitration in a general sense, is a method of arranging differences
between two parties by referring them to the judgment of a
disinterested outsider whose decision the parties to a dispute agree in
advance to accept as in some way binding. The whole process of
arbitration involves the reference of issues to an outside party,
investigation, decision, acceptance or enforcement of it. The condition
which invites arbitration is one wherein a number of persons of equal,
or nearly equal power, disagree obstinately concerning a right,
privilege, or duty, and refuse to come to terms themselves. The
underlying assumptions are that the sense of fairness is dulled in the
opponents by advocacy of self-interest, and by obstinacy, and that the
judgment of a capable disinterested third party will more nearly
approximate justice and equity. The motive which prompts appeal to
arbitration is found finally in society's desire to eliminate force as
a sanction of right, and to introduce effectively the principles of the
ethical order into the settlement of disputes among its members.
Courts, rules of law and procedure have as purpose the protection of
order and justice by compelling men to settle vital differences in a
peaceful manner. In the main, society must always trust to the common
sense, honour, and conscience of men to arrange peacefully the
differences which arise in everyday life. When, however, differences of
actual or possible grave social consequences arise, wherein high
principles or great interests are involved, and the parties of
themselves fail to agree, society attempts to secure order by creating
institutions to decide the situation according to predetermined rules
of law. The movement to introduce arbitration in the settlement of
disputes between labourers and employers is an effort in society to
lift such conflicts from the plane of brute force to the level of the
ethical order; to provide a rational method of settling such disputes
as fail to be resolved by other peaceful means.

THE ISSUES

The issues which have arisen between labourers and employers concern
the division of profits in industry or the rate of wages, and the
formal recognition of labour unions, which professedly claim a right to
have a voice with the employer in determining questions of hours,
methods of work, conditions of work, manner of payment of wages, etc.
Disputes generally concern the arrangement of terms to govern future
relations or the interpretation of the terms of an already-existing
labour contract.

THE PARTIES

As a rule, the labour union and not the individual is a party to the
industrial conflict. The individual workman is in no condition of
equality with his employer. Only a large body of labourers in an
industry or a factory is strong enough to raise an issue effectively
against an employer. An active and advanced minority of the labouring
class have created labour unions which undertake the care of the
interests of the members, and aim to deal on equal footing with the
employer. Where the men in a shop or factory are not unionized, they
may organize temporarily to enforce a demand or resist a policy, but,
generally speaking, it is the union which is involved when there is
conflict between employers and labourers. Until recently each employer,
in his individual capacity, dealt with his working men or with the
union. In late years, however, organizations of employers have been
built up extensively and they now tend to replace the individual
employer in dealing with organized labour.

THE PLACE OF ARBITRATION

As industrial evolution has been much more rapid than the adjustment
of social institutions, serious conflicts of interest, of views, of
principles, have arisen in the industrial world, to arrange which, with
final authority, we have in fact neither accepted methods nor adequate
institutions. The way has thus been left open to permit the Settlement
of these disputes to fall to the level of force, that is, of the
economic power of the parties to resist. The Strike and the lockout,
with their accompanying secondary phases, are the last resort to which
industrial conflicts are, by a sort of necessity, referred. The
penalties suffered by society are found in social disorder,
estrangement, widely felt disturbance of business, and enormous
financial losses. In the face of this discreditable condition, public
opinion and the enlightened self-interest of labourers and employers
have begun the work of creating and testing peaceful methods by which
differences may be anticipated and prevented, or if not prevented,
settled in a secure, just, and peaceful manner. In pressing forward
towards the creation of these institutions of industrial peace, society
is held back to an extent by traditional principles, settled views,
established interests and constitutional problems. This has tended to
turn the current of effort towards non-legal rather than legal methods
of industrial peace. Arbitration, conciliation, mediation, trade
agreements, shop committees, joint conferences, are some of the
institutions that have resulted. The function of arbitration is best
understood when the institution is seen in relation to the whole
industrial situation out of which it springs.

1. To a great extent relations between unorganized labourers and
employers are peaceful. If labourers ask only what employers offer, or
employers give all that labourers ask, there is no prospect of
difficulty while such conditions endure. Whether one explain the
peaceful relations referred to by apathy, weakness, or hopelessness of
unorganized labour, or by the benevolence or tyranny of the employer,
or by their antagonism to the labour union, one should not overlook the
fact that in a very large section of the industrial field relations are
peaceful.

2. Relations between employers and labour unions are to a
considerable extent peaceful and at times even cordial, though without
any formal effort at definite anticipation of trouble. Whatever the
explanation, whether the generosity of the employer or the conservatism
of the union, the relations between them are largely peaceful, a fact
which is unfortunately often overlooked by many who speak of the
industrial situation.

3. In another increasing class the relations of employers and
labour unions are cordial, or at least peaceful, through formal, mutual
understandings, and oral or written contracts. In these cases the
accredited representatives of employers and of labour unions meet in a
friendly way, discuss all questions bearing on the contract of labour,
reach conclusions, and embody them in some form of definite
understanding to cover a given period. In such cases provision is
usually made for the peaceful settlement of unforeseen minor
disputes.

The classes referred to show that industrial peace does actually
exist to a considerable extent already. However, it still remains
possible that disagreement, estrangement, war, appear in any of the
classes referred to. Hence no statistical enumeration of the numbers of
employers and labourers who live and labour peacefully covers the whole
situation. We lack still a final authoritative institution which will
be prepared to settle in a peaceful manner the conflicts that may
arise. The possibility of strike or lockout in the classes enumerated
being recognized, we may proceed to consider employers and unions
actually at war. Assuming that the employer takes action adverse to the
union's will, or vice versa, threats may be made, compromise may be
refused, war may be declared, causing a strike, or lockout, with its
train of varied evils. The contest is then thrown to the level of brute
force, each party depending on his own economic power to resist, an on
the expectation of the harm that may come to his opponent. In advance
of the actual suspension of work and declaration of strike, or at any
time during a strike, the parties may endeavour either to prevent an
outbreak, or to terminate it, by efforts at compromise among
themselves. If they fail to do so, representatives of the public, of
civil, of religious, of political organizations, may intervene to
induce them to come to an agreement among themselves for the sake of
the public. If all such efforts fail of result, one peaceful recourse
is left, namely, to ask the parties, who of themselves will not agree,
to place the issue in the hands of a disinterested tribunal and abide
by the decision. When this is done, the process is called Arbitration.
When employers and, labour unions arrange the terms of the labour
contract formally and for a definite period, the process is called
Trade Agreement, or collective bargaining, defined by the Industrial
Commission as "the process by which the general terms of the labour
contract itself, whether the contract be written or oral, are
determined by negotiation directly between employers or employers'
associations and organized workmen."

When differences of any kind arise, whether of great or of minor
importance, if the parties themselves arrange an amicable settlement,
the process is called Conciliation, defined by the Industrial
Commission as "the settlement by the parties directly, of minor
disputes, as to the interpretation of the terms of the labour contract,
whether that contract be an express one or only a general
understanding", while it is further stated that in England quite
commonly the term conciliation is applied to "the discussion and
settlement of questions between the parties themselves, or between
their representatives who are themselves actually interested". Trade
agreements, as a rule, provide for the reference of unforeseen minor
disputes to a board of conciliation composed of representatives of both
sides. The intervention of outside parties who seek to induce the
opponents to arrive at a peaceful settlement of their differences, is
called Mediation, defined by the Industrial Commission as "the
intervention, usually uninvited, of some outside person or body, with a
view to bringing the parties to the dispute together in conciliatory
conferences". When there is no prospect of peace through the action of
the parties to the dispute, and they agree to refer it to a third party
or body for judgment, the process is called Arbitration, defined by the
Industrial Commission as "the authoritative decision of the issue as to
which the parties have failed to agree, by some person or persons other
than the parties". Arbitration involves, therefore, reference of issues
to a third party, investigation, decision, action on the decision by
the antagonists. It is greatly to be regretted that usage has not
succeeded in establishing clear definitions. One may, however, avoid
confusion if one will distinguish the following situations:

(1) Informal peaceful relations between unions and employers;

(2) Formal peaceful relations provided for in trade agreements in
advance of any estrangement or difference;

(3) After differences have arisen, all efforts made by the parties
themselves to establish peace, whether before or after a strike has
been declared;

(4) Reference to outside parties of the issues and authoritative
decision by them;

(5) Intervention of disinterested outsiders, who aim to induce the
contestants to arrange for peace, either among themselves or through
reference to outside parties.

To these situations respectively, excluding the first, the terms
trade agreements, conciliation, arbitration, mediation, may be
applied.

LIMITS OF ARBITRATION

It would be a mistake to assume that arbitration is a panacea. It is
not necessarily effective beyond the term for which a decision is made.
While the elements of conflict remain in society the possibility of
dispute remains also. Hence, at best, arbitration is a makeshift, one
of the highest importance no doubt, but it does not eradicate the evils
to which it is applied. There are certain issues between employers and
labourers which will not be submitted to arbitration; fundamental
rights claimed by each party and held to be beyond the realm of
dispute. Thus, for instance, the labour union will not submit to
arbitration the question of the right of the labourer to join a union
or the right of the union to represent its members. On the other hand,
the employer would not submit to arbitration his right to manage his
own business. The Industrial Commission remarks: "Whether it is as wise
ordinarily to submit general questions to arbitration as questions of
interpretation is perhaps doubtful. It is certainly the case that minor
questions are more often arbitrated than those of great importance
involving general conditions of future labour."

KINDS OF ARBITRATION

Arbitration is voluntary when it is freely invited, or accepted by
the parties to the controversy, without reference to law, when only
good faith is involved in the acceptance of the decision. It is
compulsory when the civil law compels the parties to the industrial
conflict to submit to the decision of a board of arbitration. The law
may require a legal board of arbitration to investigate a controversy,
render a decision, and make public a report. The decision in this case
has no binding power and no sanction other than that of public opinion.
The law may provide a board which the parties may invoke if they wish,
whose decision is binding when both parties join in request for action.
Arbitration is governmental when civil authority provides
encouragement, opportunity, boards, of which employers and labourers
may avail themselves in case of dispute. In all such cases the law may
or may not confer upon a board power to administer oaths, to
subpœna witnesses and compel the production of papers and books.
In nearly all forms of arbitration the rule is to represent the
conflicting interests by equal numbers of representatives who agree on
an umpire and thus complete the organization.

COMPULSORY ARBITRATION

Sentiment throughout the powerful industrial nations seems to be
unanimous against compulsory arbitration, which involves legal
enforcement of decision. Labour unions, employers, and representatives
of the public generally, in the United States, and in Europe as well,
agree in opposing it. The sentiment against it is particularly strong
in the United States, as is shown by the amount of testimony collected
by the Industrial Commission. Compulsory investigation and decision
with publication of facts and of decision is frequently favoured where
great interests are involved, as in interstate commerce, and not a few
are found who favour enforcement of decision where both parties invoke
arbitration. New Zealand alone has attempted full compulsory
arbitration. The reasons alleged against compulsory arbitration are
numerous. It appears to invade the property rights of the employer, or
the personal liberty of the labourer, since the former might be
compelled by law to pay wages against his will, and the latter might be
forced to labour in spite of himself. It is difficult to make the
action of compulsory arbitration reciprocal, since the employer is more
easily held than the labour union, unless the latter be incorporated
and be made financially responsible, a condition from which the unions
usually recoil. As arbitrators would not be governed by a rule of law,
it is feared that sympathy with the weaker party might sway them, and
that they would be inclined to "split the difference", thereby ensuring
some gain to labour, a prospect which, it is said, might encourage
strikes and prompt unreasonable demands. It is claimed that decisions
unfavourable to labourers would tend to strengthen an already-growing
suspicion of government and of courts. Furthermore, the employer sees
in compulsory arbitration divided jurisdiction in his business,
interference of outsiders who lack technical knowledge, probable
overturning of discipline, and a weakening of his position, points that
were made with some feeling against Cardinal Manning in his mediation
in the great Dock Strike. Fear is expressed that employers would be
driven to organize for self-protection, that they would be inclined to
raise prices, or adulterate products, in order to offset losses
sustained by adverse decisions of arbitration courts. There are in
addition constitutional difficulties which in most modern nations might
make the operation of compulsory arbitration difficult, even if the
public were to accept it. It is urged in favour of compulsory
arbitration that the prospect of it would inevitably create a more
conciliatory attitude of mind in employers and labourers, that common
fear of undesirable results would develop the practice of trade
agreement and conciliation, that society would thereby gain finally
legal guarantee of industrial peace, and would be spared the enormous
losses, confusion, and violence that result from strikes. The modified
forms of compulsory arbitration — enforcement of decision when
both parties agree to submit to arbitration and compulsory arbitration
where vital public interests are immediately concerned, as in
interstate commerce — avoid many of the objections and appear to
promise good results.

VOLUNTARY ARBITRATION

That opposition to compulsory arbitration is directed against the
compulsory feature, and not against arbitration as such, is seen from
the practical sympathy, and even enthusiasm, with which voluntary
arbitration is received. In the United States, which may be taken as
typical, we find organized labour speaking strongly in favour of
voluntary arbitration. It deplores strikes, provides careful scrutiny
and a thorough test of feeling before permitting strikes, and generally
provides for appeal to conciliation or arbitration. Mr. Gompers,
President of the American Federation of Labour, said before the
Congress of Industrial Conciliation and Arbitration in Chicago, in
1894: "As one who has been intimately and closely connected with the
labour movement for more than thirty years from boyhood, I say to you
that I have yet to receive a copy of a Constitution of any general
organization, or local organization, of labour which had not the
provision that, before any strike shall be undertaken, conciliation or
arbitration shall be tried; and, with nearly twelve thousand local
trade unions in the United States, I think that this goes far to show
that the organizations of labour are desirous of encouraging amicable
arrangements of such schedules and conditions of labour as shall tend
to peace." This is fully corroborated by the Industrial Commission,
which said in its report, six years later, that "the rule of local and
national trade unions, almost without exception, provides for
conciliatory negotiations with employers before a strike may be entered
upon". In nearly all trade agreements a provision is made for
conciliation or arbitration whenever minor disputes of any kind arise.
As to employers, one should recall that all employers who stand in
friendly relations with union labour, either informally, or formally,
in trade agreements, are presumptively favourable to arbitration. The
employer who refuses to recognize or to deal with the labour union is
inclined not to favour arbitration, since it involves recognition of
the union. He may be willing to meet a committee of his men and hear
complaints, and even grant demands, but his method is not that of
arbitration. The following, from the Principles of the National
Association of Manufacturers, adopted in 1904, is typical. The
Association "favours an equitable adjustment of the differences between
employers and employees by any amicable method that will preserve the
rights of both parties", though at the same time the Association
declares that it will permit no interference by organizations. The
Republican National Platform of 1896, as well as the Democratic,
declared in favour of arbitration in interstate-commerce controversies.
Nothing on the subject appeared in either platform in 1900. The
Republican platform of 1904 contained only an endorsement of President
Roosevelt's mediation in the Coal Strike of 1902, while the Democratic
platform declared directly for arbitration without qualification. A
remarkable expression of public opinion in the United States is seen in
the creation of the National Civic Federation which has held a number
of national conferences in the interest of industrial peace.
Representatives of employers, of labouring men, of political life, of
churches, of academic circles, have met in these conventions and their
endorsements of attempts to establish industrial peace, through trade
agreements, conciliation, and voluntary arbitration, have been
unanimous and enthusiastic. The Protestant Episcopal Church in the
United States has a standing Committee on Labour and Capital whose duty
it is "to hold themselves in readiness to act as arbitrators should
their services be desired between the men and their employers with the
view to bringing about mutual conciliation and harmony in the spirit of
the Prince of Peace". The action of Cardinal Manning in the Dock Strike
in London, in 1889, together with his great efforts to establish boards
of conciliation in the London District; the presence and activity of
Archbishop Ireland in the National Civil Federation; that of Archbishop
Ryan in the Philadelphia strike, in 1896; the work of Bishop Quigley in
the strike of 1899, in Buffalo; of Bishop Burke in the Albany strike,
in 1902; that of Bishop Hoban, of Scranton, in the street-car strike of
1903, and in 1906; the activity of Bishop Spalding in the
anthracite-strike commission in 1902-3; the strong public approbation
given by His Eminence Cardinal Gibbons, and as well many instances of
successful activity by clergymen, all serve to show that Catholic
leaders recognize the value of conciliation and arbitration in
promoting industrial peace. In France, Belgium, Germany, and Italy we
find the Catholic attitude equally strong. In these countries the
endorsement of the organization of labour is most emphatic, as is also
the demand by representative Catholics for recognition of organizations
of labour, for boards of conciliation and arbitration, all of which is
in harmony with the spirit and teaching of Leo XIII, who, in his
encyclical on the condition of the working men, expresses strong
approval of conciliatory methods in arranging disputes between labour
and capital.

GOVERNMENTAL ARBITRATION

The Government of the United States enacted laws, in 1888 and 1896,
by which provision is made for mediation, conciliation, or arbitration,
in interstate-commerce disputes. If both parties join in requesting
action, the decision of the board is enforceable in equity for one
year. The law authorizes an investigation, decision, and publication of
decision, whether or not such action is invited. The only effect
produced by the law was the creation of the strike commission to
investigate the Pullman Strike in 1894. In 1905 twenty-five States of
the Union had made legal provision for arbitration, the earliest law
being that of Maryland, of 1878. There are four forms of boards:

Local arbitration without permanently constituted boards, found in
four States;

Permanent district or county boards, established by private
parties, found in four States;

Arbitration or Conciliation through the State Commissioner of
Labour, found in five States;

State boards for the settlement of industrial disputes, found in
seventeen States.

In some States several types of institution may be found. The laws
in the first group of States are practically dead letters. The same may
be said of the second group, with the exception of Pennsylvania, where
some effect has been produced. Intervention by State Commissioners of
Labour has had but moderate success. In only eight of the seventeen
States which have State boards of arbitration have real results been
accomplished. These States are New York, Massachusetts, New Jersey,
Ohio, Wisconsin, Illinois, Indiana, Missouri. The records, for
instance, of New York and Massachusetts are representative:

N. Y.
1886-1900

MASS.
1886-1904

Disputes,
Initiation,
of Board,
of Employee,
of Union,
of both,
Preliminary Action only,
Effect,
failure,
success,
of those settled —
by Conciliation,
by Arbitration,
Otherwise
Strikes in same period,

409

351
16
34
8
135

155
119

97
21
1
6189

943

465
69
154
255
185

298
460

229
224
7
2628

In England the present law dates from 1896. It provides for the
registration of private boards of conciliation or arbitration by the
Board of Trade, and it permits the Board of Trade in times of dispute
to investigate and mediate, on the request of either party to appoint a
board of conciliation, or on the request of both parties to create a
board of arbitration. In the period of 1896-1903, requests for
intervention were made by employers in twenty cases, by labourers in
fifty-four cases, by both jointly in seventy-one cases, a total of 145.
In seventeen cases failure resulted, while in the same period there
were 4,952 strikes. In France the present law dates from 1892. Either
or both parties to a dispute may apply to a local justice of the peace
who acts as conciliator. In case of a strike, if application is not
made, the justice of the peace is required to offer his services. If
efforts of conciliation fail, arbitration is attempted. The entire
proceeding is voluntary, the only pressure exerted is from the prospect
of publishing the facts and decisions. In the period of 1893-1903,
requests for intervention under the law were made by employers in
forty-two cases, by labourers in 782 cases, by both jointly in
thirty-three cases; initiative was taken by the justice of the peace in
556 cases. Full procedure was had in only 784 cases, in 342 of which
failure resulted. During that same period there were 5,874 strikes. The
present law of Belgium dates from 1887. Boards are organized in
different industries, either at the decree of the king or on the
request of the commune, the employers, or the labourers. The members of
the board are elected legally, and the board is required to meet at
least once a year. The majority of the boards already created are due
to royal initiative. In the period of four years under the action of
the law, but sixteen strikes out of a total of 610 were settled by the
labour councils. In Germany the boards are called Industrial Courts,
the law authorizing their action dating from 1890. An amendment was
added in 1901, making the formation of industrial courts compulsory in
all cities of 20,000 inhabitants. The courts are composed of
representatives of employers and labourers in equal numbers, while the
president is appointed by local authorities. Conciliation is attempted
in case of disputes; that failing, the court must investigate, render a
decision, and publish it. In 1903 there were 400 courts in existence.
Of 174 applications for intervention made in that year, 135 came from
one side only; in fifty-four cases settlement was reached by
conciliation. Of decisions rendered in that time, six were rejected.
During that year out of a total of 1,501 strikes, fifty-five were
brought to peaceful termination. In Austria, by the law of 1883, the
factory-inspectors are authorized to intervene in threatened or actual
disputes, for the sake of industrial peace, while a law of 1896
provides indirectly for conciliation and arbitration in mining.
Denmark, the Netherlands, Switzerland, Canada, and Italy have
legislated also in the interests of industrial peace, by creating
boards, and facilitating prevention or settlement of industrial
disputes. New Zealand alone has gone to the extent of inaugurating
compulsory arbitration. The present law is from 1900, with amendments
up to 1904, the original law, however, dating from 1894. There are
seven industrial districts in which the law provides for the creation
of boards of conciliation, while there is one supreme court of
arbitration over all. The latter is composed of three members, one of
whom is a judge of the supreme court, the other two being appointed by
the governor from nominations made by registered trade unions and
registered employers' associations. The local boards of conciliation
act in all cases submitted to them, and endeavour to effect peaceful
settlements. If they succeed, an industrial agreement is made which
becomes compulsory. If the parties fail to agree, the board itself
renders a decision, which may be accepted or appealed from — to
the General Board of Arbitration — within one month. If no such
action be taken by the parties to the dispute, the decision becomes
compulsory. If the case comes to the Supreme Court of Arbitration, its
decision is final. It appears that awards by this court of arbitration
affect all employers engaging in the industry affected after the
decision has been rendered, and it applies to all labourers who may
work for an employer affected by the decision. The court may extend an
award to a whole competitive field. The law concerning arbitration
applies to all employers potentially, but only to such labour
organizations as are registered. Registration is voluntary. Hence
compulsory arbitration in New Zealand depends absolutely on the
favourable attitude of organized labour towards it. In 1904 there were
266 registered unions with a membership of 27,640. In seven years,
under the action of the law, fifty-four cases of dispute were settled
by boards of conciliation, and 143 by the higher court. (Sec also
CONCILIATION, TRADE UNIONS, TRADE AGREEMENTS, STRIKES, LABOUR
LEGISLATION.)

HATCH,
Bulletin of the United States Bureau of Labor, No. 60 (latest
complete presentation of laws and facts);
Report of the Industrial Commission, 1898-1901, IV, VII ,XII,
XVII; GILMAN,
Methods of Industrial Peace (1904); BLISS,
Encyclopedia of Social Reform; REPORTS of National Civic
Federation, and those of Governmental Boards of Arbitration, in Europe
and America, contain valuable material.